A New Approach to Predicting Bankruptcy: Combining DEA and Multi-Layer Perceptron
The question of financial health and sustenance of a firm is so intriguing that it has spanned numerous studies. For investors,stakeholders and lenders, assessing the risk associated with an
enterprise is vital. Several tools have been formulated to deal with predicting the solvency of a firm. This paper attempts to combine Data Envelopment Analysis and Multi-Layer Perceptron (MLP) to suggest a new method for prediction of bankruptcy that not only focusses on historical financial data of
firms that filed for bankruptcy like other past studies but also takes into account the data of those firms that were likely to do so. This method thus identifies firms that have a high chance of facing bankruptcy along with those that have filed for bankruptcy. The performance of this procedure is compared with MLP. The suggested method outperforms MLP in prediction of bankruptcy.
Keywords: Operation Research, Data Envelopment Analysis, Super Efficiency DEA, Bankruptcy, Artificial Neural Networks, Multi-Layer Perceptron, Finance.
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ABOUT THE AUTHORS
Ayan Mukhopadhyay
Ayan Mukhopadhyay completed his Bachelors in Technology in Computer Science from RCC Institute of Technology, Kolkata in 2011 and is currently working for Cognizant Technology Solutions India Pvt. Ltd. His research interests are diverse. They primarily include Computational Aspect in Economics and Finance and Neural Networks, Risks and Returns in Finance. He has also worked with Visual Cryptography to design security systems.
Suman Tiwari
Suman Tiwari is currently pursuing MBA (International Business)from The Indian Institute of Foreign Trade. He completed his Bachelors in Technology in Computer Science from RCC Institute of Technology, Kolkata in 2011. His research areas are varied and encompass Computational Aspect in Economics and Finance,Efficient Market Hypothesis, Risks and Returns in Finance and Data Envelopment Analysis apart from working with Visual Cryptography to design security systems.
Ankit Narsaria
Ankit Narsaria completed his Bachelors in Technology in Computer Science from RCC Institute of Technology, Kolkata in 2011 and is currently working for Cognizant Technology Solutions India Pvt. Ltd. His focus of research lies in Economics and Finance. He has worked with biometric Security and identification systems as well.
Bhaskar Roy Karmaker
Bhaskar Roy Karmaker is an Assistant Professor at RCC Institute of Informaton Technology, Kolkata, India. His research interest includes Computational Aspect in Economics and Finance,Bioinformatics, Emperics in Computer Science and Engineering etc.
Ayan Mukhopadhyay
Ayan Mukhopadhyay completed his Bachelors in Technology in Computer Science from RCC Institute of Technology, Kolkata in 2011 and is currently working for Cognizant Technology Solutions India Pvt. Ltd. His research interests are diverse. They primarily include Computational Aspect in Economics and Finance and Neural Networks, Risks and Returns in Finance. He has also worked with Visual Cryptography to design security systems.
Suman Tiwari
Suman Tiwari is currently pursuing MBA (International Business)from The Indian Institute of Foreign Trade. He completed his Bachelors in Technology in Computer Science from RCC Institute of Technology, Kolkata in 2011. His research areas are varied and encompass Computational Aspect in Economics and Finance,Efficient Market Hypothesis, Risks and Returns in Finance and Data Envelopment Analysis apart from working with Visual Cryptography to design security systems.
Ankit Narsaria
Ankit Narsaria completed his Bachelors in Technology in Computer Science from RCC Institute of Technology, Kolkata in 2011 and is currently working for Cognizant Technology Solutions India Pvt. Ltd. His focus of research lies in Economics and Finance. He has worked with biometric Security and identification systems as well.
Bhaskar Roy Karmaker
Bhaskar Roy Karmaker is an Assistant Professor at RCC Institute of Informaton Technology, Kolkata, India. His research interest includes Computational Aspect in Economics and Finance,Bioinformatics, Emperics in Computer Science and Engineering etc.
